A Forbes column by Kenneth Rapoza warns, "It is time to get out of Argentina and sali corriendo [get out quickly]." (It Might Be Time To Get Out Of Argentina 05/03/2018)
Carolina Millan and Jorgelina Do Rosario report (Argentina Raises Rates to 40% After Peso Selloff Prompts Third Abrupt Increase Bloomberg Businessweek 05/04/2018):
In another surprise move, the central bank on Friday raised the key interest rate by an additional 675 basis points to 40 percent - the highest among major economies -- as the Treasury Ministry committed to reducing spending on infrastructure, and to target the country’s primary fiscal deficit at 2.7 percent of GDP, down from 3.2 percent this year.
The peso rebounded following the announcement to close 5.5 percent higher at 21.8 per dollar. It posted its biggest one-day decline since December 2015 on Thursday even after two surprise rate hikes. The currency is still down 15 percent this year against the U.S. dollar and dropped more than 6 percent this week, the worst decline since June 2016.
Behind the peso weakness is growing concern that President Mauricio Macri is dragging his feet on taking the possibly painful steps needed to revamp the economy -- and that both inflation and government spending are spiraling dangerously high.
Argentine President Mauricio Macri took office in late 2015. He did all the things that the IMF and the Washington Consensus and conservative respectable economics said he should do: paid off the vulture fund profiteers, cutting public services, dropping capital controls, etc., etc. Now Forbes is warning investors that it might be time to pull the [bleep] out of Argentina.
But that's the nice thing about Very Serious Respectable Economics. When it reduces the living standards of millions and takes things to the (possible) brink of a financial crisis, it can't be the that the policies were wrong. No, it's the wisdom of The Market and the best of all possible worlds. In early 2016 when the economy was limping, Macri promised that things would get better in the second half (segundo semestre) of the year. It's now 2018, and the Secundo Semestre seems to be further away than ever.
And, as we see in Forbes and Businessweek pieces cited above, if there's a financial crisis, Very Serious Economics has the perfect solution: cut government expenditures more, slam real wages and salaries down further, sell off public properties, drop even more of any remaining limits on foreign speculative capital, yadda, yaddda. Because the real problem according to them is that hasn't been enough austerity and privatization and so on. El Secundo Semetre is bound to arrive someday!
Luis Bruschtein writes:
La ideología del sálvese quien pueda o del “no me importa mientras a mí no me toque” se filtró por la grieta moral que ha producido este gobierno de empresarios que han hecho negocios muy productivos para sus empresas con el Estado, mientras llevaron a la economía del país al borde del precipicio.
[The ideology of everyone for themselves or of "I don't care if it doesn't affect me" has been spread by the moral crevice generated by this government of impresarios who have done very productive business for their companies with the state, while they have brought the country's economy to the brink of the precipice.]
No comments:
Post a Comment